Refinancing a Senior Development Facility, Step by Step
The credit decision is the part everyone worries about and it is rarely the part that goes wrong. What goes wrong in refinancing development finance is a redemption statement that takes eleven days to arrive, a title where the plot splits were never registered, a structural warranty that covers ten units out of twelve, and a valuer who cannot inspect until the following Thursday.
Refinancing development finance on a completed property is a conveyancing project with a credit decision attached, and development exit finance is the product at the end of it. Understanding refinancing in that order is what turns an eight week finance process into a six week one, and what stops a developer discovering in week seven that the development loan matures in week eight.
What is a development finance loan, and what is it being replaced by?
A development finance loan is short term debt drawn in stages against certified construction progress, secured on a site, and repaid from the sale or refinance of the finished property development.
Its whole design is about the build. Money is released as work is certified by a monitoring surveyor, and the lender is there to finance development rather than to finance stock. Pricing starts from 6.5 percent a year across our lender panel and leverage runs to 65 to 70 percent of gross development value, a projected figure. Interest usually rolls up. There is a personal guarantee, frequently a cost overrun guarantee alongside it, and covenants written around a build programme rather than around finance costs.
Development exit finance is the product that replaces it. Development exit finance is a short term loan secured on the completed property, sized against actual value rather than projected value, priced from 0.55 percent a month, running 6 to 18 months, with the balance reducing as individual plots sell. The Bank of England base rate of 3.75 percent, held since December 2025, sits under both, but the margin over it differs because the risks differ.
So the refinance is not a like for like swap. It is the replacement of construction era development finance with sales era development exit finance, and every step of the process exists to prove that the construction era has actually ended.
What are the two types of refinance?
Rate and term, and cash out. Every development finance refinance is one or the other, and knowing which kind of finance you are asking for changes how the case is presented. Bridging lenders use the same two labels for bridging loans generally.
A rate and term refinance replaces the existing development loan with development exit finance of broadly the same size. The new development exit finance repays the outgoing lender, covers the costs of the transaction, and nothing reaches the borrower. Underwriting concentrates on the exit, because the lender’s exposure is essentially the same as the exposure the last lender already lived with.
A cash out refinance sizes the development exit finance above the redemption figure so that the surplus is released to the developer. On a completed scheme worth £3,200,000 with £1,950,000 outstanding, development exit finance at 70 percent produces £2,240,000, of which roughly £250,000 reaches the borrower after costs. Underwriting concentrates on two things instead of one: the exit, and what the money is for.
The distinction is not academic. Cash out cases are more sensitive to the property valuation, since the whole surplus sits in the gap between value and the development loan being repaid. They attract more questions. And they take slightly longer, because a lender releasing equity against unsold property wants to understand whether the funds are going into the next development project, into holding costs, or into a hole.
Developers who only need the maturity date moved should ask for a rate and term refinance of the development finance and say so. Presenting a straightforward finance case as a cash out one invites diligence nobody needed.
What is refinancing in project finance terms?
The replacement of one finance facility with another against the same underlying asset, usually at the point where the asset’s risk profile has changed.
That is exactly what happens here, and the project finance framing is useful because it explains why the pricing moves. During construction the project is a set of promises: a contractor will build, a valuer’s projection will hold, a market will exist. Lenders price promises expensively, and that is what the original finance was paying for. At practical completion the project becomes a complete asset with observable value and comparable evidence, so the same debt against the same property and the same borrower costs less.
The other thing the project finance framing explains is sequencing. Refinancing at the wrong moment gets the worst of both. Refinance the development finance too early, before practical completion, and the property is still valued as a construction project with construction risk priced in. Refinance too late, after the development loan has matured, and the developer is negotiating development exit finance from default. The window is narrow and it opens at practical completion.
Three months before that date is when the finance work should start, because the process behind it is longer than developers expect.
How long does a development finance refinance take?
Six to eight weeks from instruction to drawdown on a typical multi unit scheme, and longer where the title is complicated.
The realistic sequence looks like this. Week one: heads of terms on the development exit finance agreed, valuation of the property instructed, solicitors instructed on both sides, redemption statement requested from the outgoing lender. Weeks two and three: property valuation inspection and report, initial legal review of title, planning consents and building contract documentation. Weeks three and four: credit approval and finance documents issued. Weeks four to six: legal enquiries, warranty and certificate collection, plot title checks, guarantees and company searches. Weeks six to eight: conditions satisfied, redemption figure confirmed to the day, completion and drawdown.
Two items on that list run to somebody else’s timetable. The valuation depends on the valuer’s diary and, on a scheme of any size, on access to every unit. The redemption statement depends entirely on the outgoing lender’s administration, and some issue them in two days while others take a fortnight and then reissue when the figure changes.
The single most useful thing a developer can do is compress week one into day one. Instructing the valuer, the solicitors and the redemption request simultaneously, rather than waiting for formal credit approval before spending anything, typically saves ten days on the finance timetable. That does mean paying for a valuation before the development exit finance is certain, which is a real risk on a marginal finance case and a sensible bet on a straightforward one. A broker who has placed similar development finance refinance cases with the same funding line will usually know which of those two situations you are in.
What does the valuation look at?
The finished property as it stands, on more than one basis, and the basis a lender chooses to size the finance against matters as much as the number.
Expect three figures. An aggregate of individual plot values, which is what the units would fetch sold one by one over a normal marketing period. A 90 day or restricted marketing figure, discounted for speed. And on multi unit schemes, sometimes a bulk or portfolio figure assuming the remaining property is sold as a block, which is the lowest of the three.
Lenders size development exit finance against different combinations of those property figures. Some work from the aggregate and apply their loan to value to it, as they would on ordinary bridging loans. Some size against the 90 day figure. Where a developer is comparing two development exit finance offers at the same headline percentage, the valuation basis rather than the percentage is frequently what separates them, and it is worth asking the question explicitly at heads of terms rather than discovering it in the offer.
Four things move the valuation itself. Completed sales from the scheme, which are the best comparable evidence available because they are the same property. Land Registry transactions in the postcode over the previous 12 months for everything else. The guide prices the agent has been marketing at, and whether the completed sales support them. The quality of the specification and the service charge position, since a high service charge suppresses value on an apartment. And the warranty position, because a unit without a structural warranty is a cash buyer’s unit and is valued as one.
What legal work does the refinance need?
More than a single asset refinance, because a development is not one property and the exit finance is secured on all of it. It is a set of them.
The title work is the substantial part of the finance process. On a scheme where individual plots have been created out of a parent title, the plot splits need to be registered, the transfers need to be in order, and any rights of way, service media and management company arrangements need to work. Where the developer has not yet registered the splits, the incoming lender’s solicitor will require it, and Land Registry timescales are not within anybody’s control.
Alongside that sits the documentation pack: practical completion certificate, building control completion certificate, structural warranty for every unit, planning consents with conditions discharged or evidenced, section agreements and any highways adoption position, building contract and collateral warranties, and service and installation certificates.
Then the corporate work, which is the same on development exit finance as on bridging loans: company searches, debentures, personal guarantees, and where the property sits in a special purpose vehicle, confirmation that the vehicle’s constitution permits the borrowing.
Two practical points. Ask early whether the incoming lender permits dual representation, one firm acting for lender and borrower, because on straightforward cases it saves both cost and a week of correspondence. And provide the documentation pack as a single indexed bundle at the outset. Solicitors on a refinancing work through enquiries in the order information arrives, and a developer who supplies documents one at a time over three weeks receives enquiries one at a time over three weeks.
Can you get 100 percent development finance on a refinance?
Not in the sense the question usually means, and the honest answer changes depending on what the 100 percent is measured against.
Against value, no. Development exit finance runs to 75 percent of property value on completed residential schemes and 65 to 70 percent on commercial property across our lender panel. No senior lender writes 100 percent of value against property, and neither do bridging loans, because the margin is the security.
Against the outgoing debt, frequently yes. Where the completed valuation is strong, development exit finance can repay 100 percent of the existing development loan and its accrued interest and still sit comfortably inside the loan to value ceiling. That is what most developers actually want when they ask the question, and on a profitable scheme it is the ordinary outcome rather than an exception.
Against total project cost, sometimes, using more than one finance instrument. Senior finance development lending at 65 percent of gross development value with mezzanine capital behind it, priced from 12 percent a year, reaching 85 to 90 percent, with the balance from the developer or an equity partner taking 40 to 60 percent of the profit. That structure exists, it is not cheap, and it belongs to the construction phase rather than to a development finance refinance of completed property.
What no structure does is create equity that is not there. Where the property valuation comes in below the development loan, the answer is capital, a sale, or a conversation with the incumbent lender, not cleverer finance.
Which lenders actually refinance development finance?
Four categories, and they behave so differently that knowing which one you are talking to is worth more than a rate comparison.
Specialist bridging lenders. The largest source of development exit finance by volume. These are the funding lines that write bridging loans across property generally, and completed development stock is among the security they like most: new, warranted, saleable, with a clear repayment route. A bridging loan from this category typically prices from 0.55 percent a month, runs to 75 percent of value on residential property, and completes fastest, because these lenders make credit decisions in days rather than at monthly committees. Their weakness is size: many bridging loans books have concentration limits that cap what any one scheme can borrow.
Specialist development lenders. The funding lines that wrote the original development loan in the first place, and their competitors. They understand construction, they will look at a scheme still finishing, and they can move from a development loan to an exit facility without re-learning the property. They are often slower than bridging lenders and occasionally cheaper.
Clearing banks. Cheapest where they will act, and they act rarely on unsold new build stock. A bank refinance is realistic where the units are let and the exit is a term mortgage, and unrealistic where the exit is a sales programme.
Private capital and wholesale funders. Family offices and funds, including the institutions that finance bridging loans at wholesale level and occasionally lend directly. They write the awkward cases: unusual property, concentration a bridging loans book will not take, a borrower with history. They price for it and they decide quickly.
A broker’s job at this stage is filtering. Sending a case to a bridging lender whose concentration policy rules it out wastes three weeks, and three weeks matters when the development loan matures in eight. Running the same case across a panel of over 100 lenders means the two or three funding lines whose appetite genuinely fits are identified before anybody pays for a valuation.
Should the refinance go to a mortgage instead?
Where the units will be held and let, yes, and that decision should be made before the development exit finance is arranged rather than after.
The two refinancing destinations are different products. Development exit finance is short term, priced monthly, repaid from sales, and structured with plot releases. A mortgage is long term, priced annually, serviced from rent, and assessed on income cover. Commercial mortgages from 5.5 percent a year, or buy to let mortgages on individual units, are tested on rent covering 125 to 150 percent of the mortgage payment. A mortgage on completed property development stock is assessed on the rent roll rather than on a guide price, and at roughly a third of the monthly cost of bridging loans a mortgage is the cheaper answer by a wide margin for anything held beyond about a year.
The complication is timing. A mortgage lender wants a letting history, and at practical completion there is none, so no mortgage is available on day one. So the ordinary refinancing sequence is development exit finance first, letting the property during it, then a mortgage refinance once tenancies are in place and the rent is evidenced. That is a two stage plan and it should be presented as one from the beginning, because a lender pricing development exit finance with a mortgage refinance as the stated exit is pricing a cleaner exit for its loan than one with a vague sales plan.
Mixed schemes complicate it further. Where a block has residential above and a commercial unit below, the residential may sell while the commercial is let, and the commercial element may need its own mortgage on its own timetable. Splitting those two elements early, in the title work and in the finance structure, is far easier than splitting them later, and a mortgage on the commercial unit can complete on its own timetable.
What breaks a refinance?
Five things, and four of them are documents.
The warranty. A structural warranty missing, incomplete, or covering fewer units than the security requires. It cannot be produced retrospectively at speed and it stops the transaction dead.
The property development title. Plot splits unregistered, a missing right of way, an unresolved management company structure, or a restriction on the register nobody had noticed.
The redemption statement. Late, wrong, or reissued at a higher figure than the new facility was sized to cover. Request it in week one and ask specifically what notice period the outgoing lender requires for early repayment.
Planning conditions. A planning condition requiring works or an agreement before occupation, still undischarged, on a building that is otherwise finished. Lenders will not complete against an occupation restriction.
The valuation. The one that is not a document, and the one bridging lenders reprice against fastest. Where the figure comes in below expectations, the development exit finance shrinks, and a cash out refinance can turn into a rate and term one or into a shortfall the developer has to fund.
The pattern across all five is that they are knowable in advance. Developers who commission their own title check and assemble the certificate pack three months before the development loan matures converts most of these from surprises into tasks. That is the whole of the practical guidance, and it is worth more than any guide to comparing rates or any guide to choosing between bridging loans.
What should be agreed at heads of terms?
Eight points, and they are where the real finance negotiation happens.
The development exit finance amount and what property valuation basis it is measured against. The term, taken longer rather than shorter. The rate and whether interest is retained or serviced, which on bridging loans changes the cost of a longer term completely. The arrangement fee and any exit fee on the finance. The minimum release price and release amount for each plot. Whether release prices reset once loan to value improves. What consents are needed to let a unit and refinance it onto a mortgage rather than sell it. And what an extension would cost if the sales period runs long, since a mortgage exit takes longer than a sales exit.
Rates get all the attention and the release mechanics matter more. Development exit finance 10 basis points cheaper a month with release prices set above the market will cost a developer far more than the saving, because every sale will need a consent and the sales programme will run on somebody else’s response times.
If your development is finished or close to it, we arrange development exit finance across a panel of over 100 lenders, including the wholesale institutions that finance bridging loans and the specialist books that finance development projects directly on completed property development schemes. Where construction is still running, that is development finance. Where the completed units will be let and mortgaged, the destination is commercial mortgages, and where a single short dated facility against property is what the project needs, that is bridging loans.
Construction Capital is a trading name of Lenzie Consulting Ltd, registered in England and Wales, company number 08174104. We are a commercial finance broker and introducer, not a lender, and we are not authorised by the FCA. Where a case is a regulated activity we arrange it through lenders who hold the relevant FCA permissions. Rates, fees and terms are indicative, vary by lender and deal, and are never an offer of finance. Written by Matt Lenzie.